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EU Warns About the Impact of COVID-19 on Non-Regulated Crypto Investments

Eu warns

European Union’s financial regulatory agency, the European Securities and Markets Authority (ESMA) has analyzed the effects of COVID-19 on the crypto investments and the risks it has developed for investing in non-regulated crypto-assets.

ESMA is the EU’s independent financial authority and it has warned the crypto industry, after analyzing the financial market, about the high-risks that entails the investment in non-regulated crypto assets.

The regulatory body has published the latest report on Wednesday, which highlights the impact of COVID-19 on the financial market and how it has increased the risks regarding the investment in non-regulated crypto-assets more than usual.

According to the authorities, the crypto industry has experienced a huge spike in the value and trading volumes in the latter half of 2020 along with Bitcoin reaching its highest value. ESMA suggests that this spike was fuelled by the positive flow of news in the crypto industry. PayPal’s move has also played a role in this by introducing the crypto buy and sell option on its platform along with the growing attention on DeFi ( decentralized Finance).

ESMA comments on the growth of the crypto industry, “it is also fuelled by strong investor demand and search for yield amid unprecedented global fiscal and monetary stimulus.” ESMA also warns about the risks, “Amid the increasing volumes and demand, crypto assets are highly volatile and bear high risks for investors. Prices of non-regulated crypto assets at all-time highs imply significant risks for investors.”

The new report by ESMA also notes the growth of DeFi sector and highlights its benefits like disintermediation, its availability 24/7, resistance to censorship along the risks entailing operational resilience, governance, and scalability. However, ESMA will continue to watch the growth in DeFi industry as it might bring challenges regarding the regulations and supervision.

The regulatory agency has played a key role in monitoring financial regulation in the European Union. In February, France’s top financial regulator’s chairman, Autorite des Marches Financiers, proposed to make European Securities and Markets Authority (ESMA) the chief regulatory authority for the crypto industry in the European Union region.

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